Dollar falls as aussie, kiwi score gains

U.S. consumer confidence drops in January

WilliamL. Watts

LOS ANGELES (MarketWatch) — The U.S. dollar lost ground against major rivals Tuesday, while the Australian and New Zealand currencies gained after upbeat economic data from the two Pacific nations.

The ICE dollar index
DXY, -0.30%
which measures the greenback against a basket of six other major currencies, fell to 79.527 from 79.790 in North America late on Monday.

The dollar extended losses after a report showed U.S. consumer confidence in January fell to the lowest level since 2011. The Conference Board said its consumer confidence index fell to 58.6 this month, missing analysts’ estimates of 64.3. The December figure was upwardly revised to 66.7.

“The increase in the payroll tax has undoubtedly dampened consumers’ spirits, and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock,” said Lynn Franco, economic indicators director at the Conference Board. See: Consumer confidence drops in January.

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The WSJ Dollar Index
BUXX, +0.00%
which captures the U.S. currency’s moves against a slightly wider basket of rival units, declined to 70.80 from Monday’s close at 71.04.

The report about the downbeat mood of consumers arrived as U.S. monetary-policy makers gathered for a two-day meeting. Economists widely expect the Federal Reserve to maintain its aggressive bond-buying program until there are signs the economy is recovering at a stronger and broader pace.

While most currency majors on Tuesday traded in “relatively quiet ranges ... [t]he main exceptions were [New Zealand dollar] and [Australian dollar], which both outperformed after firmer domestic data,” said Sue Trinh, currency strategist at RBC Capital Markets.

Reuters

The Australian dollar
AUDUSD, +0.0000%
traded at $1.0472 versus $1.0408 in North American action late Monday. A survey by National Australia Bank showed an improvement in business confidence to a level of +3 in December, well above the -9 reading for November.

“As one of the foremost high-beta currencies, the [Australian dollar] is especially sensitive to the perceived performance of the American and Chinese economies, both of which have looked more resolute of late,” said Michael Derks, chief strategist at FxPro in London.

Meanwhile, the New Zealand dollar
NZDUSD, +0.0000%
appreciated to 83.92 U.S. cents, compared with 83.18 cents before official data showed the country posted a trade surplus of 486 million New Zealand dollars ($408 million) last month, significantly higher than the median forecast of a NZ$125 million deficit during the month.

The data could see a softening in Reserve Bank of New Zealand Gov. Graeme Wheeler’s recent stance at this week’s policy meeting, wrote strategists at Lloyds Bank in London.

“He had viewed that the strength of the New Zealand dollar had undermined export earnings and encouraged demand for imported goods,” the Lloyds strategists said.

Among Asian currencies, the Indian rupee
USDINR, +0.0000%
strengthened after the Reserve Bank of India cut its key lending rate by a quarter-percentage point to 7.75%, as was widely expected. The dollar fell to 53.72 rupees from 54.05 rupees before the reduction, which is expected to aid economic growth amid easing inflationary pressures. Read full story on the RBI interest rate cut.

Elsewhere, the British pound
GBPUSD, +0.0000%
traded at $1.5761, rising with $1.5693.

Varahabhotla Phani Kumar in Hong Kong contributed to this article. Follow him on Twitter @MktwKumar.

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